The silent man of LuxLeaks fights back

Long the forgotten face in the tax scandal, Raphael Halet is finally ready to clear his name.

VIVIERS, France — For more than a year after he was charged in the so-called LuxLeaks trial, Raphael Halet was unable to defend himself.

The former PricewaterhouseCoopers employee believed he was prohibited by contract from explaining why he had sent a journalist documents detailing the controversial tax practices of companies like Ikea, Amazon and Apple.

He said he was so convinced of this that when he was arraigned in January 2015, he falsified the testimony he gave to an investigating magistrate, claiming that his fellow defendant, the investigative journalist Edouard Perrin, had strong-armed him into spilling the company’s secrets.

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It was only in April 2016, after Perrin’s lawyer found out about the contract, that a judge informed Halet that he was free to tell the truth. By then, Halet said, it was too late. He had undermined his credibility and badly bungled his defense. He was convicted in June of theft and violation of Luxembourg’s secrecy laws, and given a nine-month suspended sentence and a €1,000 fine.

Next week, Halet will be back in court. He is appealing his verdict, and this time he hopes the case will be less of a defense than a prosecution. His aim: to convince the court that recent developments — most notably the European Commission’s decision to order Ireland to claw back up to €13 billion in back taxes from Apple — show the practices he exposed were not just morally wrong, but illegal.

The trial is likely to be another headache for European Commission President Jean-Claude Juncker, pouring fresh fuel on a scandal that has dogged him since shortly after he took office in November 2014. Many of the controversial tax rulings took place while he was prime minister of Luxembourg, and Juncker has faced repeated accusations in the European Parliament of negligence or even steering tax policy to attract investment. Juncker denies involvement in his country’s tax rulings.

Unlike Antoine Deltour, a junior auditor at PwC who is the other whistleblower in the LuxLeaks case, Halet has for the most part remained out of the spotlight. But while it was Deltour who first leaked information detailing how multinationals shaved billions of euros from their taxes by using complex networks of Luxembourg subsidiaries, it was Halet who provided the returns detailing how much they were saving.

In his effort to clear his name, Halet has been pouring over financial documents, lobbying members of the European Parliament and opening up to journalists. He has also started a website — www.helpraph.com — asking for financial support. His goal is to put the focus back to where he believes it belongs: multinational tax avoidance. “The real story is about tax evasion and why we’re being told our schools and hospitals don’t have enough money,” he said.

No turning back

Halet’s brush with the law began in May 2012, after he and his wife, Sophie Halet, watched an exposé on French television based on material Deltour had leaked to Perrin, the investigative journalist.

Born to two deaf parents, Halet was brought up by his grandparents in Meuse, in northeast France. His grandfather was a school teacher who lived by a strict rulebook: children had to stand when he entered the classroom and only sit down when instructed to do so — and he applied the strict code of conduct at home. “Everyone in my grandfather’s mind was equal,” Halet recalled. “There were no special rules just because you were the son or daughter of someone known in the local community.”

Halet said the practices detailed in Perrin’s report — giant tax breaks for the world’s largest companies sanctioned by the Grand Duchy of Luxembourg — struck him as unfair, and he immediately resolved to help expose them further.

He was well placed to do so. As a low-level cog in PwC’s tax department, Halet’s job was to scan and archive thousands of confidential documents that revealed the tax structures put in place by massive global conglomerates.

Shortly after watching the show, Halet made an email account called “[email protected]” and used it to contact Perrin. The first email arrived on May 21.

“Hello, are you going to continue your investigation into tax havens?” Halet asked.

“I’m not used to having internet conversations with an interlocutor whose name, job and intentions I do not know,” Perrin responded. “It’s up to you if you want to introduce yourself.”

Halet told Perrin that his job provided him with access to documents inside PwC but that he wanted to remain anonymous in order to keep his job. “Call me Max,” he wrote.

Over the next few weeks, Halet started identifying some of PwC’s largest clients. First on his list was Arcelor Mittal, the Luxembourgish steel manufacturer.

Sufficiently intrigued, Perrin met with Halet in Metz in October 2012. He was suspicious of Halet and wondered if he was a company mole, or even a government spy. The pair discussed Halet’s job and motivations for providing the documents.

A few days later, Halet make another email account — this time called “[email protected]” — a reference to a 1964 film by the French director Henri Verneuil. He shared the password with Perrin. Then, one afternoon inside PwC’s Luxembourg offices, Halet accessed the company server and downloaded 16 corporate tax returns showing exactly how much companies had avoided paying in taxes by transferring profits through Luxembourg.

He uploaded the documents, which included information on Amazon, Ikea and the iTunes branch of Apple, into a draft email for Perrin to access. Then he signed off and never again made contact — despite multiple attempts by Perrin to reach him.

In June 2013 Perrin completed a second documentary with Cash Investigation using Halet’s documents and later handed the entire cache of files to the International Consortium of Investigative Journalists, which published Perrin’s findings in November 2014 in what has now become known as the LuxLeaks scandal.

The raid

Shortly after LuxLeaks leaped into the headlines, Halet was at the hospital recovering from a serious accident when he received a call from a French gendarme telling him his house had been burgled and his car had been stolen.

“Come quickly,” the gendarme said.

Minutes later, Halet was speeding along country roads toward his home. But when he arrived, he quickly realized something was wrong. His car was still parked in the driveway; his home appeared to be untouched. His wife, Sophie, was standing outside, the color drained from her cheeks, next to a smartly dressed gendarme named Alexandre Vanderberghe.

“I asked the gendarme what was going on, and he answered saying ‘I am not aware of anything, we have orders to bring you here.’” Halet said. “Those words have stayed with me. Who sent orders down the chain to bring me home?”

Sophie, who was working several kilometers away at a psychiatric hospital in the outskirts of Metz, had been told a different story by another police officer also present at the scene. She was told the family car had been damaged and the home vandalized.

It was when Halet spotted Marc Vandemeulebroeke, PwC’s general counsel, a studious-looking man in his early sixties, that he realized what was going on. Waiting outside in a black 4×4 was Wim Piot, head of PwC’s fiscal department, and Vinciane Istace, the head of human resources.

Under French law, a bailiff armed with a court injunction is authorized to collect relevant facts or data from a suspect’s house that could prove useful in court. The bailiff is permitted to request the presence of gendarmes during a search, though under no circumstance should they enter the premises and participate in an interrogation of the person in question unless a problem materializes, according to Halet’s lawyer, Bernard Colin.

According to Halet, four gendarmes and the three senior employees of PwC joined the bailiff in his house, where they questioned him and his wife for nearly six hours. “What was supposed to be a simple confiscation of belongings turned into a full-blown interrogation designed to put as much pressure on me as possible,” said Halet, who worked for PwC between September 7, 2006 and December 29, 2014.

A spokesperson for the gendarmerie in Metz declined to comment on the gendarmes’ actions and referred questions to the prosecutor, who said an internal inquiry had discovered no wrongdoing.

Lieutenant-colonel Philippe Marestin, a spokesperson for the Gendarmerie Nationale in Paris, also said that the officers had behaved appropriately. “The gendarmes are there to assure the safety of the bailiff,” he said. “The gendarmes were present and took no action to put pressure on Mr. Halet or his family. Imagine for a minute that the bailiff was attacked with a knife or was manhandled by the person … and the gendarmes are outside smoking a cigarette.”

PwC said in a statement: “We believe Raphael Halet has been treated according to French and Luxembourg law.”

Confused, with no lawyer and little clarity about what his rights were, Halet handed over his belongings — including his laptop, his passwords and his children’s tablet computers. His wife, who knew nothing about his role in the LuxLeaks scandal, was shocked by the proceedings. “It was like Halet was a member of the Mafia,” she said. She admitted she felt hurt by her husband’s decision to keep his role in the LuxLeaks scandal a secret. “I couldn’t believe it.”

Halet quickly found a lawyer and less than a week later, found himself face to face with PwC once again — this time with the company’s managing partner, Didier Mouger, a businessman with silver hair and an insatiable passion for golf, who had made his way to Metz for the meeting.

The encounter began at 4 p.m. of December 2, 2014 in the ground floor conference room of the bailiff’s office. Halet was accompanied by Sophie and Colin. Mouget was joined by Vandemeulebroeke, an IT expert, a French lawyer representing PwC and Anita Bouvy, an internal auditor at PwC, who had been tasked with locating Halet after the LuxLeaks story came out.

“My wife no longer likes visiting this part of town due to the memories of what happened here,” said Halet.

The two parties worked in the early hours of the morning to draft a four-page document outlining what would happen to Halet should he speak to anyone else about the information he had leaked. The final agreement threatened Halet and his wife with damages of €10 million and the repossession of their home if they ever spoke about their role in the LuxLeaks scandal. The document also forbade him from questioning the validity of the court’s decision in Metz to provide a bailiff access to his home and emails, despite a 1881 French law that specifically protects journalists sources.

PwC said that “Halet accepted the grant of an option to PwC to take a mortgage on his house” and the option was never actually exercised.

It was only after Christelle Henon, Perrin’s lawyer, read Halet’s testimony to the magistrate that the truth began to come out. She noted that Halet had signed an agreement forbidding him from speaking about his motives for leaking the documents.

In April 2016, on the opening day of the trial in which Halet, Deltour and Perrin were to be judged, Henon revealed the existence of the document to the court, prompting the judge to rule that it was invalid.

Freed to speak his mind, Halet spent the rest of his trial defending his conduct as a whistleblower. But his previous statement had cast doubts about his credibility and his motives, undermining his testimony on the stand. The judge found Halet guilty on the premise that there is no existing law in Luxembourg or at a wider European level that would protect him in his status as a whistleblower. However, the punishment was reduced from a maximum sentence of five years in jail as it could not be proved that he benefited financially from his leaks and that his actions had contributed to greater tax transparency on a global level. The judgement also said that Halet had “acted in the general interest of the public and against tax optimisation of a morally questionable nature.”

LuxLeaker strikes back

In appealing his sentence, Halet plans to take the battle to PwC and its clients. He and his lawyer want to convince the court the documents he exposed were not just company secrets but evidence of illegal activity — making his actions clearly worthy of whistleblower protections.

Halet declined to share the details of his strategy, so as not to undermine his argument ahead of the trial. But he cited examples of what he described as an emerging consensus that the behavior he uncovered was illicit, including investigations in Europe and the United States into Amazon’s tax structure in Luxembourg and Ikea’s use of subsidiaries in the Netherlands, and a decision by the European Commission in August to order Ireland to claw back €13 billion in unpaid taxes from Apple.

Despite growing public awareness around whistleblowers and the pressure they come under, legal experts say that Halet’s chances of winning his appeal are slim — because of the robust nature of Luxembourg’s business secrecy laws. A report released on Wednesday by the European Network on Debt and Development, a tax transparency campaign group, found that the number of sweetheart tax deals between EU governments and multinational firms is still increasing, especially in Luxembourg and Belgium.

“The story of Halet is another glaring example of the EU’s utter failure to protect those that sacrifice much in their life for the public interest,” said Fabio de Masi, a politician from Die Linke in Germany and a Member of the European Parliament. “Despite much public talk about tax avoidance after LuxLeaks, he has received no support whatsoever from authorities in France or anywhere else. It shows the hypocrisy in political discourse and the bad shape of our democracy that whistleblowers are left so unprotected.”

Whatever the ultimate verdict, Halet’s offensive is bound to keep the behavior he exposed in the spotlight. Already, his leaks have raised awareness about tax avoidance and whistleblowing and made life particularly uncomfortable for Juncker.

Renewed attention, Halet said, will spur policymakers to close tax loopholes, increase protections for those who report corporate misbehavior, and — given his travails — take measures to make sure that others aren’t pressured into remaining silent.

“We are increasingly of the view that an outright ban on gagging orders would be for the best,” said Alex Cobham, chief executive of Tax Justice Network, a network of campaigners that strives for tougher rules to fight against tax evasion. “That could be achieved simply by making them non-enforceable in law — so companies could still make people sign, but people would not be bound.”

For his part, Halet is serene about the decisions he made. He wonders what his late grandfather — the strict disciplinarian — would have thought of his role in the ongoing affair. As for his grandmother, he sniggers when asked about her reaction to the news. “That’s some serious skullduggery,” she told Halet. “You were just right to do what you did.”